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Canadian Agriculture Policy Canadian Agriculture Policy in a Global Contextin a Global Context

Policy Disputes Information Consortium

April 23-26, 2003

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Overview

• Describe Agriculture Canada’s current policy environment

• Outline key elements of Agricultural Policy Framework

• Need to stay ahead of future challenges to enhance profitability of agriculture

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Current Agricultural Policy Environment

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The Agriculture Policy Framework has dominated agricultural policy developments in Canada

• Federal government committed an additional $5.2 billion over six years

• Governments signed framework agreement in June, 2002

• Most governments have negotiated detailed targets and action plans

• APF has shared agenda with trade litigation (e.g. dairy panel) and negotiations (e.g. WTO)

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APF is a strategy to help Canadian industry be more profitable by getting ahead of challenges ...

• Advancing technology

• Changing consumer demands and increasing

customer requirements

• Increasing global competition

• Increasing North American integration

… that producers from all countries face.

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Low-cost low-subsidy competitors are expanding production…

• Brazil and Argentina– high production

growth with low levels of government support

– production levels already surpass U.S. production

• Trend expanding – (e.g. Wheat from Russia and Ukraine) ...putting pressure on

commodity prices

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20

40

60

Canada EU US Argentina Brazil

Growth in Oilseed Production

(1995-1997 to 1999-2001)%

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Growth potential of Canadian sector outside bulk commodities

• Exports to North America up from 45% in 1990 to 72% 2002

• Value-added products increasing share of exports

• 91% of all Canadian Agri-Food to US are value-added products

Bulk

Value added

Agriculture and Agri-Food Export to US & Mexico, 1990-2002

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5

10

15

20

1990 1995 2000

Billions $

Value-AddedBulk

United States68%

Mexico3%

People's Republic of China

1%

EU(15)5%

Japan9%

Rest of the

World14%

Source: IMTD and AAFC aggregations.

Destination of Canadian Agriculture and Agri-Food Exports, 2002

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Policies have to recognize a more integrated North American market in trade …

… and in investment

• Producers and processors on both sides of the border are becoming integrated

• Policies have consequences that cross borders

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Under the APF, Canada’s strategy to build a more profitable sector includes.• $5.5 billion over five years for permanent

business risk management programs and $900 million for new programming in:– food safety and quality– environment

• $2.5 billion from provincial cost-sharing

• $1.2 billion to help producers bridge to new system

• $0.6 billion to accelerate benefits of APF– integration strategy to gain recognition and

improve market access

• $10.7 billion total

– innovation– renewal

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Agricultural Policy Framework Strategies

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Food safety and food quality will be strengthened ...

• Goal is to protect human health and increase consumer confidence

• Actions include:

– Conducting research to address knowledge gaps

– Government recognizing and certifying of food

quality systems to improve market access – Facilitating industry adoption of on-farm HACCP

systems– Developing traceability systems that follow products

through the production process

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Environmental stewardship will protect health and promote viability ...

• Goal is to strengthen environmental management to secure benefits for citizens and recognition by consumers

• Actions include:– Supporting planning and provide incentives to

reduce environmental risk– Providing national indicators of environmental

performance– Researching beneficial on-farm management

practices to enhance environmental functions– Working with industry groups to provide economic

incentives for environmental protection

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Investment in science and innovationwill secure agriculture’s future …

• Goal is to ensure that Canadian agriculture and agri-

food is at forefront of science and innovation

• Actions Include:

– Benchmarking current levels of investment in priority areas

– Realigning public investment in R&D to improve

collaboration and partnering

– Pursuing pilot projects (e.g. Soy 20/20) and bundling of

private and public strategies

– Creating a climate for innovation

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Producers will have additional tools in adapting to the knowledge economy• Goal is to help farmers acquire skills and resources to

adapt to the complexity of the global agriculture and agri-food sector

• Actions include:

– Helping farmers adapt to evolving consumer preferences and

scientific advances

– Providing assessment tools and financial consulting

– Providing training support on national skill requirements

– Broadening awareness of emerging opportunities

– Increasing access to capital

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Business Risk Management changes are geared to support long-term profitability, innovation, and market orientation ...

• Shift to whole farm approach

• Focus on stabilizing margin

• Provide comprehensive insurance, stabilization, and

disaster coverage in a national two-program set

• Less distorting companion programs

… with a more decoupled approach

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Risk management: A two-program set

1) Improved Production Insurance

• Expand the current suite of products

• Introduce a “whole farm” option to cover all

crops on the farm

– More comprehensive and cheaper insurance

• Move to consistent cost-sharing of premium

costs to ensure equitable treatment

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Risk management: A two-program set

2) Improved NISA

• Whole-farm integrated stabilization and disaster mitigation program

• Eligibility patterned after current NISA/Disaster

• Government funds accessed when need established

• Producer share program cost

• Coverage based on previous olympic average production margin

• Margins include accrual adjustment

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International strategy to maximize international opportunities from domestic system …• Increase market development

– research, branding, marketing assistance, and coordinated market strategies

• Improved market access – negotiations, strategic alliances, advocacy and

consultations

• Overcome technical barriers – trade rules, early warning, and market access

protocols

• Enhance international development – Research, capacity building and relationship

building

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Future Challenges and Goals

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APF programming is a major first step, but only the beginning of long-term strategy to meet the challenge of profitability

• Canadian industry and governments will continue to face pressure to change

– technological change– managing new products (e.g. GMO)– legal rulings– new WTO agreement

• Pressure on Canada’s marketing institutions is growing

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Need ongoing link to industry to develop longer-term market strategies

• Establishing an ongoing mechanism to promote success– 11 industry-led value-chain roundtables– organized along commodity lines from inputs to exporters– cross-section of senior industry players

• Goal to create dynamic of on-going policy response to market realities:– international strategies tied to domestic actions– link industry and government efforts– realign government research and regulations to support

industry’s market priorities

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Immediate Next Steps

• Implementation of international strategy now

• Governments sign detailed implementation agreements on domestic APF actions in coming weeks

• Three value-chain roundtables already complete– Two more by summer– Initial steps on most others already underway